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Factors Influencing The Propensity For Cross-Border Trade

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  • Aradhyula, Satheesh V.
  • Tronstad, Russell

Abstract

We estimate a simultaneous bivariate qualitative choice model of Arizona agribusiness firms propensity to trade and visit as a tourist with the cross-border state of Sonora, Mexico. The trade equation is estimated as an ordered probit model with responses of: 1) a firm has not ever traded or investigated doing any trading activities with Sonora, 2) the firm has not done any trade with Sonora but they have investigated doing business in this cross-border state, and 3) the firm has traded with Sonora, either directly or through a second handler like a broker. A proprietors propensity to visit Sonora as a tourist is modeled from the binary response of whether the individual has ever visited Sonora as a tourist or not. Simultaneity arises since both trade and tourist visits are hypothesized to influence one another. Results indicate that tourist visits have a greater influence on whether firms trade than traditional variables considered like firm age and size. Venture business visits, quantified through the tourism equation, were also found to have a greater impact on an agribusiness firm's propensity to trade than traditional variables. Our results suggest that communities seeking to develop and expand cross-border trading activities should target entrepreneurs with an exploratory and venture spirit first. Then, target firms that are fairly established (over 15 years in age) and desire to diversity their production risk through multiple geographic production regions. Firm size and foreign language fluency of the agribusiness owner were found to be less significant than tourist visits, venture business visits, and firm age.

Suggested Citation

  • Aradhyula, Satheesh V. & Tronstad, Russell, 2001. "Factors Influencing The Propensity For Cross-Border Trade," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36067, Western Agricultural Economics Association.
    • Handle: RePEc:ags:waealo:36067
    DOI: 10.22004/ag.econ.36067
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    References listed on IDEAS

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